Still time to turn tide on Doha trade talks

The indifference and apathy that one finds in Washington from both ­the Congress and President
Barack Obama
about the Doha round of world trade talks, and the alarm and concern expressed by leaders elsewhere about the languishing negotiations, mark the end of the post-1945 era of American leadership on multilateral free trade.

Evidence of anxiety outside the United States has been clear to everyone for almost a year.

German Chancellor
Angela Merkel
and British Prime Minister
David Cameron
were concerned enough to join Turkey’s President Abdullah Gül and Indonesia’s President Susilo Bambang Yudhoyono in appointing Peter Sutherland and me as co-chairmen of a high-level trade experts group in November 2010.

We held a prestigious panel with these leaders at Davos in January this year, and in our interim report we gave full-throated support to concluding Doha.

But there was no response from the US government.

In September, former British prime minister Gordon Brown, former Spanish prime minister Felipe González, and former Mexican president Ernesto Zedillo reminded G20 leaders that in November 2009, at their first meeting in London, they had expressed “a commitment to .­ . . conclude the round in 2010". And, two weeks ago, the United Nations met again about the millennium development goals.

Goal 8 is about instruments such as trade and aid, and Goal 8A commits the UN member nations to “develop further an open, rule-based, predictable, non-discriminatory trading and financial system".

But, although almost every country today has embraced preferential free-trade agreements, the recent leader in this proliferation is the US.

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There, Congress and the President apparently have had plenty of time to discuss bilateral FTAs with South Korea, Colombia and Panama (the White House says Congress will approve the deals within days), as well as the regional Trans-Pacific Partnership, but none for negotiating the non-discriminatory Doha round, which is languishing in its 10th year of talks.

Indeed, it is notable that, although Obama’s State of the Union address in January 2010 at least mentioned Doha, his address in January this year did not. He confined himself to promoting the pending bilateral agreements with Colombia and other emerging-market countries.

Obama’s regrettable retreat from support for the Doha round is the result of many factors and fallacies. These were highlighted in an open letter to Obama I organised and released, over the signatures of nearly 50 of the most influential trade experts worldwide, urging a presidential shift in policy towards Doha.

The ­US President is captive to the country’s labour unions, which accept the false narrative that trade with poor countries is increasing the ranks of the poor in the US by driving down wages. But there is plenty of evidence for the rival narrative that rapid and deep labour-saving technological change is what is putting pressure on wages, and that imports of cheap labour-intensive goods that American workers consume are offsetting that distress.

Again, Washington lobbyists have bought into the absurd claim of trade experts such as Fred Bergsten that the gain from Doha, as it stands now, is a paltry $US7 billion or so annually.

This ignores the far greater losses that a failed Doha round would entail, for example, by undermining the World Trade Organisation’s credibility as the principal guarantor of rules-based trade, and by leaving trade liberalisation entirely to discriminatory liberalisation under preferential bilateral agreements.

Again, someone needs to tell Obama that imports create jobs, too, and that his emphasis on promoting American exports alone is bad economics.

Most of all, Obama is badly served on trade by his senior colleagues. Secretary of State
Hillary Clinton
, for example, was opposed to trade liberalisation when she ran against Obama for the Democratic presidential nomination, and advocated a pause in free-trade negotiations.

She also misinterpreted the great economist Paul Samuelson as a protectionist, when he said nothing of the kind. She has not recanted.

Likewise, now that
Warren Buffett
is considered to be Obama’s most trusted economic adviser, it is worth recalling that in 2003 he produced the astonishing prescription that the best way to reduce the US trade deficit was to allow no more imports than it could finance from its export earnings.

An amused and alarmed Samuelson drew my attention to this nutty idea. Although Buffett’s prescription of higher taxes for America’s wealthy is entirely desirable, will Obama realise that a genius in one area may be a dunce in another?

What we need today is for world leaders to stop pussyfooting and to unite in nudging Obama towards a successful conclusion of the Doha round. That alone would provide the counterweight to the forces that pull him in the wrong direction. It is not too late.

Jagdish Bhagwati is professor of economics and law at Columbia University and senior fellow in international economics at the Council on Foreign Relations.